{"id":11534,"date":"2022-02-04T10:29:20","date_gmt":"2022-02-04T10:29:20","guid":{"rendered":"https:\/\/todaysveterinarybusiness.com\/?p=11534"},"modified":"2022-06-15T17:48:45","modified_gmt":"2022-06-15T17:48:45","slug":"restrictive-covenants-stay-away-please","status":"publish","type":"post","link":"https:\/\/navc.sitepreview.app\/todaysveterinarybusiness.com\/restrictive-covenants-stay-away-please\/","title":{"rendered":"Stay Away, Please"},"content":{"rendered":"

Common in veterinary practice transactions, restrictive covenants are designed to prevent the seller from soliciting clients and competing with the buyer after the sale. Through such restrictions, buyers aim to protect themselves and ensure that the acquired business does not lose value due to the seller\u2019s re-entering the market. To fulfill those objectives, a purchase agreement\u2019s restrictive covenants should be negotiated, clearly stated, endure for a reasonable period (for example, two to five years) and be practical in geographic scope.<\/p>\n

Ensuring Enforceability<\/h3>\n

For a buyer to truly benefit from non-solicitation and non-competition provisions, both parties should engage attorneys familiar with the relevant state laws. One case decided by a Pennsylvania appeals court in 2017 illustrated this point and underscored the importance of negotiating an effective restrictive covenant.<\/p>\n

In Joseph v. O\u2019Laughlin, the buyer and seller executed an agreement<\/a> for the $750,000 purchase of a veterinary hospital. A five-year restrictive covenant prohibited the seller from directly or indirectly engaging or participating in competitive business within a 50-mile radius of the hospital. The seller also was prohibited from soliciting past, present or future clients of the practice during those five years.<\/p>\n

However, six months after the transaction closed, the seller asked the county zoning board to approve a veterinary hospital eight miles from the buyer\u2019s. The seller\u2019s other steps included:<\/p>\n